There are a number of procedures to be followed by a small-scale industry at the stage of setting up of the industrial unit and then going into production.
At the entry stage, a small scale unit is expected to get clearance in principle for allocation of land, water, electricity, etc., and in some cases only, an approval that the proposed equipment is to be manufactured in stated quantity (e.g., defense equipment).
The project implementation stage involves the conversion of the application after clearance into actual supply of the commodity or the service. The risk at this stage is very high because there is no proper monitoring to ensure that all applications will be dealt with in the chronological order or with the same degree of objectivity.
Image Source: businessnonstop.in
ADVERTISEMENTS:
The operational stage in the life cycle of a SSI unit relates to the maintenance of a large number of registers whose number, nature and use are not clear to the entrepreneur. There are also a plethora of returns to be filed with different agencies.
Each SSI unit has to cope with inspections by various departments throughout the year.
Several State Governments in the post-liberalization period (after 1991-), at various points of time have formulated either laws or rules to provide single window clearance for setting up any small scale enterprise within a set time frame. Some States like Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, UP, Punjab, Haryana, Gujarat, Maharashtra took the lead in rationalizing returns and even inspections that were within their limited purview.
ADVERTISEMENTS:
However, there are different definitions for certain terms like the ‘wages’, manufacturing, factory, etc. applied under various Acts like the Factories Act, Industrial Disputes Act, Employees State Insurance Act, Minimum Wages Act, Payment of Wages Act, High Court and Supreme Court rulings etc.
Even if industry stops production for reasons of viability it has certain statutory obligations to electricity, revenue, and labour departments; it cannot wind up its operations, notwithstanding the clearance of creditors’ obligations. Small-scale industries in the post-WTO regime had to prepare for the removal of quantitative restrictions (QR) apart from gradual de-reservation.
(Certain products were reserved for exclusive production by the small scale industries that gave them protection from competition both from within and outside the country, perpetrating inefficiencies in production and markets).
This scenario called for a structured statutory intervention to promote, develop and transform the sector into a competitive sector. This gave birth to the new law for the SSI sector.
ADVERTISEMENTS:
Since the rest of the world has combined the small and medium enterprises under one umbrella legislation – though the words small and medium have their varying definitions – our country also thought of moving in tandem with the rest of the world for redefining the sector as SME sector. This also envisages that over a period of time there could be easy facilitation for mergers, amalgamations, franchisee arrangements across the globe particularly in the SME sector.